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OpenTable Moves Into Delivery — Why — And Why Now?

OpenTable’s Expanding Menu Of Services

For an entire generation of consumers, booking a restaurant by telephone is as foreign an activity as using a rotary phone or creating a document on a typewriter. And it was OpenTable that created this shift in how getting a table at a restaurant could be done without the hassle of “dialing for dining.”

Launched 20 years ago in 1999, OpenTable learned the hard way that building a reservations platform required a “go-deep-before-going-wide” strategy. Diners interested in a table in Chicago didn’t much care how many restaurants were in Cincinnati. Shortly after stubbing their platform toes on that key matchmaker principle, they opened their platform with a handful of restaurants in the San Francisco Bay area, then expanding from there after getting more consumers and restaurants on board.

A decade later in 2009, OpenTable was a nationwide service, online reservations were a common practice and the firm went public with a listing on the Nasdaq. Five years later, OpenTable exited the public markets, acquired at an at-the-time record-breaking all-cash $2.6 billion deal with The Priceline Group.

At the time, Priceline CEO Darren Huston noted the deal was a natural move, given the inherent synchronicity between the two marketplaces.

“The kind of work that we do day-to-day is very similar. It’s just a different marketplace,” Huston told The Wall Street Journal.

Two years later, however, the two properties seemed less of a natural fit, Huston was no longer CEO and Priceline was reporting a $941 million write-down on OpenTable, announcing its plans to scale back its investment in the firm’s growth.

“It’s something that’s taken a little bit longer to scale up than we thought it would,” then-interim CEO Jeff Boyd said in an interview. “If we can execute, I think we’ve got a fabulous opportunity to build a global business.”

But going forward, he noted, the plan was to pursue that fabulous opportunity on a much more “measured and deliberate basis” – i.e., a slower one – with some necessary adjustments to its business model.

The problem, as agreed upon by the experts at the time, wasn’t that it was necessarily a mistake for Priceline to have bought OpenTable – even though it was one of the very few acquisitions that wasn’t directly related to its core travel business. Instead, the challenge lied in strong global competitors, along with domestic mobile-centric apps with a different business model that came integrated into new, cloud-based POS systems. Expansion turned out to be a bit slower than once anticipated.

That was then, and this is now.

The Priceline Group has since changed its name to Booking Holdings. There is a permanent CEO in Glenn Fogel. And OpenTable is no longer stuck on the back burner. Today, according to their release figures, OpenTable connects 51,000 restaurants globally and seats over 125 million diners monthly. Booking Holdings has made it clear in the last 18 months that it is ready to pull OpenTable off the bench and to expand the range and depth of its services. Most recently, that effort is observable in the form of OpenTable adding online ordering for delivery to its reservations platform.

But the bigger-picture goal, Fogel noted in his most recent post-earnings call with analysts, isn’t just to expand what OpenTable can do – it is also to focus on the original reason it was brought into the Priceline/Booking travel ecosystem in the first place five years ago: to help build a richer ecosystem for the travelers it serves across its many platforms.

“Providing a service, a value to a traveler, there’s much more than just going on a site and booking a hotel. That’s what we’re trying to do, is create all these different things together in a way that provides significantly more value than any single service could do on its own,” Fogel told investors.

Dining out – or in – With OpenTable 

About a week ago (July 24), OpenTable announced on its blog that it would be giving its users an option to order online for delivery, so they can have their preferred restaurant food in their own homes.

“We’re all about dining out, but we know that even diehard diners have moments when they’re craving the comforts of home and a great meal,” OpenTable wrote on the blog post announcing the expansion.

To serve diners in those moments when the comforts of home outstrip the excitement of eating out, OpenTable has announced integrations with  Caviar, Grubhub and Uber Eats to offer delivery and pick-up options at more than 8,000 restaurants in 90+ metros on OpenTable’s newly updated iOS app. Users of the app will see a “Get it delivered” option beneath the available reservations and establishments where ordering out is an option. After the user chooses where they want to order from, the app will directly route them to one of OpenTable’s preferred delivery partners complete the transaction.

The integration with delivery partners is one of two upgrades OpenTable announced last week for the 125 million or so consumers who use the platform each month. In an effort to offer what they described as “more relevant, personalized options to help you find the right restaurant,” the latest version of the iOS and Android app will also provide dynamic, data-backed recommendations for each individual user’s home screen, “just for you based on past bookings, favorites.” Consumers also have an opportunity to educate the AI tech by allowing consumers to up- or down-vote restaurants to improve future recommendations.

“Sometimes plans change or the weather doesn’t cooperate. Instead of canceling their reservations, diners can now enjoy the meal they had planned from home,” said OpenTable CTO Joseph Essas. “Our goal is to make OpenTable the go-to app for all dining occasions. Adding delivery is an important next step.”

The food delivery market is a competitive one, with a value that is forecast to expand to $24 billion by 2023, up from $17 billion this year. Pairing up with a service like OpenTable – which has hundreds of millions of customers opening its online or mobile booking app – seems an obviously desirable choice for a delivery app that aims to stand out in the crowd.

Moreover, the move allows Booking Holdings to move closer to its broad vision of using OpenTable going forward.

The Connected Ecosystem for Journeys Far (and No-so-Far) 

In his call with investors last month, CEO Fogel noted that the long-term strategy is really about hooking the OpenTable platform and customer base to the wider Booking Holdings family of travel sites and services. He even mentioned in passing that the fact that “it hasn’t happened yet” is a source of some frustration.

“We need to be able to provide a combined package product … and using all the data we have on our customers to provide them with a better, more effective way to give them value,” he said.

That is partly about the traveling consumer, who can leverage what OpenTable knows about them and their eating habits to get tailored recommendations when arriving in a new city. But it is also about realizing that the Booking Holdings customer isn’t just a person who is traveling: There is a massive opportunity with OpenTable’s large base of dining establishments and customers to further develop the platform itself into a natural marketing channel “for all those restaurateurs.”

The ultimate goal, Fogel said, is to create a single ecosystem for the Booking Customer so that whether they are on a long journey or a short one, their experience is connected. That is why, for example, they’ve created transferable loyalty points between OpenTable and some Booking Holdings travel platforms, with plans to add others. And they have sought out other acquisitions and partnerships among service providers like car rental agencies.

“We’re experimenting with different ways to package these services and give better value to the customer,” Fogel noted in that last earnings call with analysts in May.

Booking Holdings’ next earnings call will happen in less than a week. It will be interesting to hear how the company discusses the services it is building out – and the interconnected ecosystem it is trying to create – as it heads into the hyper-competitive back half of the year.

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